When people are looking to protect assets from the costs of long-term care in Florida, one popular option is the concept of a personal services contract. This article discusses legal ways to protect assets in the event your elder needs long-term care Medicaid. Long-term care Medicaid can help pay for the cost of care at home, in assisted living, or in a nursing home.
As discussed throughout this website, the goal in creating eligibility for long-term Medicaid generally involves legally reducing the assets to $2,000.00 for a single person or around $140,000 for a couple (the specific requirements are laid out here). In creating Medicaid, we cannot give money away as this creates a Medicaid transfer penalty. So if we cannot give money away, how can we create Medicaid eligibility while protecting assets? One legal way to do this is to pay a caregiver for future services for the elder in advance. This is generally referred to as a personal services contract.
A personal service contract is an agreement between a caregiver (who can be a family member) and the elder to provide him or her with personal care services for his or her lifetime. This is a lump sum transfer of assets to the caregiver(s) in exchange for their contractual promise of care. As long as the transaction is for fair market value and is legally binding, the government cannot disqualify the applicant for Medicaid long-term care benefits as the transfer is not a gift, it is a payment for services. Remember that we cannot give away money (or other assets) to receive Medicaid eligibility, but the applicant is allowed to hire someone to help them out within reasonable parameters. Personal services contracts have been used for years in Florida and have been tested in the Florida appellate court as a valid tool for valid Medicaid "spend down" planning.
The services provided by the caregiver generally includes bill payments, talking to doctors, grooming needs, visitation, hospital advocacy, etc., that the nursing home or assisted living facility does not generally provide. The caregiver is essentially getting paid to help the elder receive better care than he or she would receive without an advocate in such a facility.
The payment amount is calculated by the elder’s life expectancy, the amount of work expected and the hourly rate. A typical example of this calculation is as follows:
Mom is 85 years old and in the nursing home. She has $50,000 in her bank accounts. We want to create eligibility for Medicaid and she has a caregiver who is able and willing to assist her. Mom's life expectancy according to the Florida Department of Children and Families is 6.62 years. If the caregiver is able to work ten (10) hours per week advocating for Mom, which we would deem reasonable under the circumstances, we could pay the caregiver $35/hour (or less). With this calculation, we would be able to pay a caregiver around $120,484 for his or her expected services (10 hours/week x 52 weeks/year x $35/hour x 6.62 years = $120,484.00). Since Mom only has $50,000 in assets, we could legally pay the caregiver a $50,000 lump sum to create Medicaid eligiblity and reduce her assets to less than $2,000. In this example, this is all done with assistance and guidance from a good elder law attorney.
There are a few items to note in this example:
- It may be reasonable to pay a caregiver $35/hour in some, maybe not all cases, depending on the work the caregiver provides. The caregiver may be acting in more than just a caregiver role. For instance, the caregiver may provide physical service (checking in on the patient/elder, helping with hygiene issues) while also may provide some things that are closer to a guardianship role (such as bill paying and other legal responsibilities). So we may be able to justify a higher hourly rate in some circumstances, which is very important
- Personal services contract are very exact and would only be done under certain circumstances with attorney consultation
- The caregiver will have income tax issues in getting a lump-sum payment
- The caregiver may need to get consent from Mom's family/other children as this may disrupt Mom's estate plan
- The Personal Services Contract, and all spend down, is documented to the Department of Children and Families, so this is all disclosed to Medicaid as part of the application process
- The Department of Children and Families reviews the contract, pay rate and the hours as a part of the Medicaid application
- Each situation is different so an elder law attorney will review all options for correct Medicaid "spend down" planning
We typically look to personal services contracts as a part of spend down planning for single people. Medicaid rules are different between a married couple and a single person, so there may be other (i.e., better) legal ways to protect assets for a married couple.
Explain This Again?
The use of a personal services contract is most likely used in "crisis Medicaid planning," where the elder is already in a nursing home or the elder needs imminent long-term care Medicaid (such as in-home or assisted living Medicaid). In the above example, Mom is in the nursing home and will be private paying for care when her Medicare/health insurance ends (if she had a 3 day qualifying hospital stay before going to rehabilitation). Mom has money that would otherwise disappear to the cost of long-term care as the nursing home costs over $10,000/month on private pay. Since her money will be spent very quickly without Medicaid paying for long-term care, the family will want to discuss how to best spend Mom's money to get Medicaid qualification (for Medicaid to pay for her care faster). The personal services contract will help legally spend her funds down to less than $2,000, so she will qualify for Medicaid sooner with an elder law attorney's assistance.
Need Help With Your Elder?
If your elder is in a nursing home, or if you are looking to protect assets and apply for Medicaid, our office is able to help, no matter where you live! We help people all across Florida in difficult situations. We charge a $200 office consultation fee to meet with elder law attorney Rep DeLoach, your Medicaid expert, to assist your family in this difficult and confusing time.
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